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The most common situational theory was developed by Fred Fiedler. Fiedler believed that an individual’s leadership style is the result of their experiences throughout the lifespan, therefore it is extremely difficult to change (Aamodt, 2015). Fiedler would argue that rather than teaching people a particular leadership style, instead one should concentrate on helping people understand their particular leadership style and learn how to match that style to the particular situation (Aamodt, 2015). In order to help one understand their specific leadership style, Fiedler developed the Least-Preferred Coworker Scale (Aamodt, 2015). According to Fiedler, because leadership behavior is fixed effectiveness could only be improved by restructuring tasks or changing the amount of power the leader had over organizational factors such as salary, disciplinary action, and promotions (Armandi, 2003).
Fiedler’s model does have some weaknesses. For example, some leaders may be more effective in certain situations than others (Kest, 2006). The LPC scale can be questioned because the assessment is performed by one individual on another (Kest, 2006).

The theory holds that the effectiveness of a task group or of an organization depends on two main factors: the personality of the leader and the degree to which the situation gives the leader power, control, and influence over the situation or, conversely, the degree to which the situation confronts the leader with uncertainty (Nebeker, 1974).

To Fiedler, stress is a key determinant of leader effectiveness (Fiedler and Garcia 1987; Fiedler et al. 1994), and a distinction is made between stress related to the leader’s superior, and stress related to subordinates or the situation itself. In stressful situations, leaders dwell on the stressful relations with others and cannot focus their intellectual abilities on the job. Thus, intelligence is more effective and used more often in stress-free situations. Fiedler concludes that experience impairs performance in low-stress conditions but contributes to performance under high-stress conditions. As with other situational factors, for stressful situations Fiedler recommends altering or engineering the leadership situation to capitalize on the leader’s strengths.

Fiedler’s situational contingency theory holds that group effectiveness depends on an appropriate match between a leader’s style (essentially a trait measure) and the demands of the situation. Fiedler considers situational control the extent to which a leader can determine what their group is going to do to be the primary contingency factor in determining the effectiveness of leader behavior.

Fiedler’s contingency model is a dynamic model where the personal characteristics and motivation of the leader are said to interact with the current situation that the group faces. Thus, the contingency model marks a shift away from the tendency to attribute leadership effectiveness to personality alone (Forsyth, 2006).

The leadership style of the leader, thus, fixed and measured by what he calls the least preferred co-worker (LPC) scale, an instrument for measuring an individual’s leadership orientation. The LPC scale asks a leader to think of all the people with whom they have ever worked and then describe the person with whom they have worked least well, using a series of bipolar scales of 1 to 8, such as the following:

Unfriendly

1 2 3 4 5 6 7 8

Friendly

Uncooperative

1 2 3 4 5 6 7 8

Cooperative

Hostile

1 2 3 4 5 6 7 8

Supportive

....

1 2 3 4 5 6 7 8

....

Guarded

1 2 3 4 5 6 7 8

Open

A high LPC score suggests that the leader has a "human relations orientation", while a low LPC score indicates a "task orientation". Fiedler assumes that everybody's least preferred coworker in fact is on average about equally unpleasant. But people who are indeed relationship motivated, tend to describe their least preferred coworkers in a more positive manner, e.g., more pleasant and more efficient. Therefore, they receive higher LPC scores. People who are task motivated, on the other hand, tend to rate their least preferred coworkers in a more negative manner. Therefore, they receive lower LPC scores. So, the Least Preferred Coworker (LPC) scale is actually not about the least preferred worker at all, instead, it is about the person who takes the test; it is about that person's motivation type. This is so, because, individuals who rate their least preferred coworker in relatively favorable light on these scales derive satisfaction out of interpersonal relationship, and those who rate the coworker in a relatively unfavorable light get satisfaction out of successful task performance. This method reveals an individual's emotional reaction to people they cannot work with. Critics point out that this is not always an accurate measurement of leadership effectiveness. Fiedler expanded his studies outside of the lab and showed the interrelations between adjustment, group performance and leadership style in a volunteer medical team under different conditions of stress while working in isolated villages of Central America. The task-oriented leader performed better in situations that were favorable and relatively unfavorable while the relationship-oriented leader only fared better in situations of intermediate favorableness. [1] As the LPC is a personality measure, the score is believed to be quite stable over time and not easily changed. Low LPCs tend to remain low and high LPCs tend remain high which shows that the test-reliability of the LPC is strong [2].

According to Fiedler, the ability to control the group situation (the second component of the contingency model) is crucial for a leader. This is because only leaders with situational control can be confident that their orders and suggestions will be carried out by their followers. Leaders who are unable to assume control over the group situation cannot be sure that the members they are leading will execute their commands. Because situational control is critical to leadership efficacy, Fiedler broke this factor down into three major components: leader-member relations, task structure, and position power (Forsyth, 2006). Moreover, there is no ideal leader. Both low-LPC (task-oriented) and high-LPC (relationship-oriented) leaders can be effective if their leadership orientation fits the situation. The contingency theory allows for predicting the characteristics of the appropriate situations for effectiveness. Three situational components determine the favourableness of situational control:

Leader-Member Relations, referring to the degree of mutual trust, respect and confidence between the leader and the subordinates. When leader-member relations in the group are poor, the leader has to shift focus away from the group task in order to regulate behavior and conflict within the group (Forsyth, 2006).

Task Structure, referring to the extent to which group tasks are clear and structured. When task structure is low (unstructured), group tasks are ambiguous, with no clear solution or correct approach to complete the goal. In contrast, when task structure is high (structured), the group goal is clear, unambiguous and straightforward: members have a clear idea about the how to approach and reach the goal (Forsyth, 2006).

Leader Position Power, referring to the power inherent in the leader's position itself.

When there is a good leader-member relation, a highly structured task, and high leader position power, the situation is considered a "favorable situation." Fiedler found that low-LPC leaders are more effective in extremely favourable or unfavourable situations, whereas high-LPC leaders perform best in situations with intermediate favourability. Leaders in high positions of power have the ability to distribute resources among their members, meaning they can reward and punish their followers. Leaders in low position power cannot control resources to the same extent as leaders in high power, and so lack the same degree of situational control. For example, the CEO of a business has high position power, because she is able to increase and reduce the salary that her employees receive. On the other hand, an office worker in this same business has low position power, because although they may be the leader on a new business deal, they cannot control the situation by rewarding or disciplining their colleagues with salary changes (Forsyth, 2006).

Since personality is relatively stable though it can be changed, the contingency model suggests that improving effectiveness requires changing the situation to fit the leader. This is called "job engineering" or "job restructuring". The organization or the leader may increase or decrease task structure and position power, also training and group development may improve leader-member relations. In his 1976 book Improving Leadership Effectiveness: The Leader Match Concept, Fiedler (with Martin Chemers and Linda Mahar) offers a self paced leadership training programme designed to help leaders alter the favourableness of the situation, or situational control.

One implication of "job engineering" or "job restructuring" through additional training is that if all leaders are given the same training regardless of their position in the contingency model, it could create a mismatch between the leader and situation. "The right person for a particular job today may be the wrong person in six months or in one or two years."[3] For example, if a company has a workshop for all managers that effectively changed the task structure from low to high, it might seem good for the company at first glance, but it is important to note that leaders who were effective in a low task structure situation could become very ineffective in a situation with a high task structure.

Task-oriented leadership would be advisable in natural disaster, like a flood or fire. In an uncertain situation the leader-member relations are usually poor, the task is unstructured, and the position power is weak. The one who emerges as a leader to direct the group's activity usually does not know subordinates personally. The task-oriented leader who gets things accomplished proves to be the most successful. If the leader is considerate (relationship-oriented), they may waste so much time in the disaster, that things get out of control and lives are lost.

Blue-collar workers generally want to know exactly what they are supposed to do. Therefore, their work environment is usually highly structured. The leader's position power is strong if management backs their decision. Finally, even though the leader may not be relationship-oriented, leader-member relations may be extremely strong if they can gain promotions and salary increases for subordinates. Under these situations the task-oriented style of leadership is preferred over the (considerate) relationship-oriented style.

The considerate (relationship-oriented) style of leadership can be appropriate in an environment where the situation is moderately favorable or certain. For example, when (1) leader-member relations are good, (2) the task is structured, and (3) position power is either strong or weak. Situations like this exist with researchscientists, who do not like superiors to structure the task for them. They prefer to follow their own creative leads in order to solve problems. In a situation like this a considerate style of leadership is preferred over the task-oriented.

Fiedler’s LPC can be difficult to interpret. In 2018, University of Wisconsin Executive MBA students of Alex Stajkovic’s Organizational Behavior class developed the following figure, to better analyze situations for best fit. This diagram allows quick diagnosis of leader-member relationship first, followed by task structure, and finally application the layer of leader’s position of power. Each layer is assessed in context of the one around it, to guide the viewer to the appropriate fit for the given situation. Furthermore, it allows the viewer to see how this need changes as one of the other dynamics is adjusted, which can indicate a need for a new leader who is a better fit, or a shift in situational circumstances to return to a better environment for the assigned leader to continue to flourish.

Researchers often find that Fiedler's contingency theory falls short on flexibility.[citation needed] They also noticed that LPC scores can fail to reflect the personality traits they are supposed to reflect[citation needed].

Fiedler’s contingency theory has drawn criticism because it implies that the only alternative for an unalterable mismatch of leader orientation and an unfavorable situation is changing the leader. The model’s validity has also been disputed, despite many supportive tests (Bass 1990). The contingency model does not take into account the percentage of "intermediate favourability" situations vs. "extremely favourable or unfavourable situations", hence, does not give a complete picture of the comparison between low-LPC leaders and high-LPC leaders.

Other criticisms concern the methodology of measuring leadership style through the LPC inventory and the nature of the supporting evidence (Ashour 1973; Schriesheim and Kerr 1977a, 1977b; Vecchio 1977, 1983). Fiedler and his associates have provided decades of research to support and refine the contingency theory.[citation needed]

Cognitive Resource Theory (CRT) modifies Fiedler’s basic contingency model by adding traits of the leader (Fiedler and Garcia 1987). CRT tries to identify the conditions under which leaders and group members will use their intellectual resources, skills and knowledge effectively. While it has been generally assumed that more intelligent and more experienced leaders will perform better than those with less intelligence and experience, this assumption is not supported by Fiedler’s research.

Hooijberg, R. and Choi, J. (1999) "From Austria to the United States and from Evaluating Therapists to Developing Cognitive Resources Theory: An Interview with Fred Fiedler", Leadership Quarterly 10(4): 653–66.